.xz is the latest compression type, much smaller than .gz or .bz2 or zip. The 'unxz' utility decompresses it, and it is then piped to 'dd' -- the "|" is the pipe operator, which means that the output of the unxz operation becomes the input to dd.
If downloading via a Windows PC you will need an extractor that supports the "'.xz" file extension for compressed files. Winrar didn't support it. Download another 'universal extractor' in order to then install via the Win32diskimager program.

You need the devx
Puppy can be transformed into a complete compile environment by the installation of just one file, that we refer to by the generic name of "devx". In this case it is 'devx_sap6_5.91.sfs'. Normally, the Bootmanager can be used to install and uninstall SFS files, however due to the manner in which Puppy is installed on the SD card, it is necessary to click on the devx file to open it, then copy all the files into "/" -- see instructions at http://puppylinux.com/hard-puppy.htm. I have not tested the devx. If anything is missing out of it, fixes welcome. Note that as well as C/C++ support, the devx has Vala, Genie and BaCon compilers, see http://bkhome.org/genie and http://bkhome.org/bacon -- BaCon is enhanced BASIC and is our recommended language for all newbies who want to be able to create fast and small compiled apps. Note, there is also an IDE for BaCon, and a GUI RAD, but not yet included in the devx.

How can I speed up compiling?

Compile under Qemu emulation on a fast CPU
Compile outside of X
Compile on Puppy (less deamons)
Compile on a USB connected hard drive if running on Raspberry Pi

1. Reboot Puppy before using dd in Puppy (to write SD image)
2. Make use of Puppy resources
We have a great kennel of resources
The forum, Puppy chat etc
3. Turn on the Firewall during initial noot
4. You can create programs in bashscript without the devx
5. Please don't put your Raspberry Pi on the floor. Was one lowered heel away from destruction yesterday - must build case
6. Audio possibility

set audio
aplay
what does aplay -l give you?
If it lists multiple cards, you can select the audio out by running:
aplay -Dplughw:X filename.wav
X is the card you choose from 0 to n